George Osborne has announced that he wanted to give the Bank of England more powers to regulate buy-to-let mortgages.

The announcement which came out of the blue is in response to Mark Carney the head of the Bank of Englands repeated warnings that a buy-to-let bubble could represent a threat to the stability of the economy.

Changing Housing Market

The changing housing and mortgage market now means that the proportion of Britons owning their own home has fallen to a 26 year low. Many house buyers are unable to obtain a large enough mortgage to enable them to buy there own home and the Chancellor responded to an overheating London housing market by restricting banks to be able to lend no more than 15% of mortgages to people borrowing over 4.5 times their income. Despite the worries over an overheating buy-to-let market lending still remains below the amount borrowed in the boom just before the financial crash.

Up until recently the Chancellor had resisted calls by the Bank of England for greater controls over buy-to-let mortgages. However, he has now responded to MPs questions by stating:

"The Governor of the bank and the FPC (Financial Policy Committee) have asked for additional powers
over buy-to-let mortgages, which weren’t included. We have granted those
powers so that they have that tool as well.”

Previously in 2014 the Bank of England had asked the Chancellor for additional powers to cap the size of landlords mortgages based on their expected rental income. The Chancellor decided against this instead putting the matter out for further consultation and thereby 'kicking it into the long grass'.

Tuesday, October 27, 2015

A Swindon landlord, Javaid Lone has been fined £16,650 after pleading guilty to 13 breaches of housing regulations.

Mr Lone rented 31 and 33 County Road as a guest house for up to sixteen tenants - split into multiple bed-sitting rooms with shared kitchens and shared bathrooms.

Following a visit to the guest house by officers from Swindon Borough Council, the conditions at the property were found to be unsafe and unhygienic. Officers pinpointed insufficient fire exits, covered smoke alarms, dangerous electrical wiring and filthy living conditions in their case against Mr Lone.

Although Mr Lone did make some attempts to meet the councils requests to improve the property they failed to meet expectations.

The final straw for the council followed the non-payment of a £9,598 electricity bill which ended with the supply getting cut off.

The council's prosecution accused Lone of taking advantage of naive tenant's, many of whom were non-English speaking, and therefore vulnerable.

Kirsty Real, acting for the council describe to the court how -

“He tried to cram in as many residents as possible and the effects of that were all around the property. There was a significant fire and safety risk in this property and the tenants could have suffered serious harm in the event of a fire.”

The CEBR's latest predictions, (published 26th October) has annual house price growth for 2015 at 5.6%, up from June's prediction of 4.7%.

They predict growth in 2016 to be 3.5%, followed by 4.2% growth in 2017.

Lack of supply are cited as the main reason for the heightened figure.

The main author of the report, Nina Skero reflects -

“a reduction in the number of properties being put on the market has placed further upward pressure on house prices in some parts of the UK. This is a result of low levels of housebuilding, but also other factors such as an ageing population and the rising cost of moving up the property ladder.

The price gap between a first-time home and a larger family home has skyrocketed in some regions, such as London, curbing activity in the housing market. For many, the rungs of the property ladder are moving further apart, making it impossible to upsize”.

Saturday, October 24, 2015

The one thing that hits me is that rent control smacks of failure. Failure not by landlords. We are merely the messangers, No, it's failure of Governments to create a housing environment that doesn't leave rental demand in some kind of equilibrium with demand.

Where rents are rising strongly, this means that clearly demand is outstripping supply. This is normally as much about lack of housing of all tenures. This is something outside the control of individual landlords. It solution lies at the national level and clearly is a function in most countries of individual Government policy. Most of them have been inept at creating the policy environment to produce enough housing quickly enough. Hence, too often they are then forced by political expedency to deal with the symptons of under supply of housing by caving in to Generation Rent and opting for rent controls.

Friday, October 23, 2015

Rent Smart Wales, the brand name for the new registration and licensing requirements under Part 1 of the Housing (Wales) Act 2014 will be launched on 23 November 2015. From this date, the Rent Smart Wales team will be in place and the website (www.rentsmart.gov.wales) and helpline will be live.

Landlords who need to register, and landlords and agents who need to become licensed, will be able to register and apply for a licence from this date. They will have 12 months from 23 November 2015 in which to comply with the new legislation. During this first year there will be a focus on raising awareness of the new requirements and encouraging compliance.

Rent Smart Wales will improve the image of the private rented sector, which is an increasingly important housing option for many people. It will benefit people who rent their home in the sector and improve the practices of landlords and agents and help to tackle the bad practice amongst some private landlords.

Following its launch, the next 12 months will see landlords registering with Rent Smart Wales and, for some, they will be considering whether they wish to become licensed themselves, or commission a licensed agent to manage and let their properties. Alternatively, of course, they may choose an approach including both.

Letting agents will need to ensure that they are complying with the new licensing obligations. Many have indicated that they want to comply early to ensure their client landlords are reassured that they are licensed.

The London Property Licensing website sent out a freedom to information request to see how many private rented sector landlords have been prosecuted under the Housing Act 2004 by each of London's 33 councils during the three year period from 1 April 2011 to 31 March 2014.

Naively, I still clung to a 'slither of hope' that the Government might decide to back-track on their Right to Rent checks policy, but no ...

The Home Office announced yesterday -

"from 1 February 2016, all private landlords in England will have to check new tenants have the right to be in the UK before renting out their property."

The new law also includes anyone who sub-lets or takes lodgers into their home.

The Immigration Minister James Brokenshire said:

"Right to rent checks are quick and simple, and many responsible landlords already do them as a matter of routine. We are providing landlords in England with all the advice and support they need before the checks go live on 1 February 2016.

The new rules are part of the Immigration Act 2014 which introduced measures to reform the immigration system. Right to rent is about deterring those who are illegally resident from remaining in the UK. Those with a legitimate right to be here will be able to prove this easily and will not be adversely affected.

The government’s new Immigration Bill builds on the reforms in last year’s Act, making it harder for people to live and work in the UK illegally. The Bill proposes new measures to make it easier for landlords to evict illegal tenants as well as a new criminal offence targeted at unscrupulous landlords who repeatedly fail to carry out right to rent checks.

The phased introduction of right to rent, starting in the West Midlands, was to allow time to assess how the measures work in practice and to carry out an evaluation, which has also been published today. An expert panel, including the Equality and Human Rights Commission, as well as representatives of landlords and letting agents, local authorities, and Crisis (the homelessness charity) has worked with the government on the implementation and evaluation of the scheme.

Under right to rent, landlords should check identity documents for all new tenants and take copies. The scheme has been designed to make it straightforward for people to give evidence of their right to rent and a range of commonly available documents can be used."

So put simply, from the 1st of February, landlords will legally be required to see the original copy of one of the following documents, as well as making a copy for their records, that they then must retain for a minimum period of one year -

“There are signs of a slowing pace of price rises in some sectors of the market, with the overall October rise the lowest we’ve recorded at this time of year for five years. We still have another national average record however, as prices continue their upward trend. This is mainly being fuelled by the heady price rises of typical first-time-buyer homes. A near 10% price surge in this category in the last year proves that despite tighter lending criteria in last year’s Mortgage Market Review, some first-time buyers can still afford the higher prices being asked for by sellers in this sector. It’s also symptomatic of a shortage of properties coming to market with two bedrooms or fewer, combined with demand from both first-time buyers and landlords investing in reaction to the huge rental demand for smaller properties.

With local authorities, housing associations and developers no longer satisfying the country’s housing needs, those in particular looking to rent or buy smaller homes must hope for the cavalry to come to their rescue, in the form of government action or large-scale institutional investment. Initiatives such as continued relaxation of planning rules to boost building, 200,000 new affordable homes available to buy over the next five years, or American-style institutional investment in the rented sector will take time to come over the hill, as the sound of bugles is still in the distance. In the meantime, it seems the army of privateer buy-to-let investors remains the only short to medium term way to scale up our rental capacity.

Tenant demand is such that many letting agents are reporting viewings and tenancy applications on the same day as marketing properties. In some cases they’ve nothing left to rent until tenants move out or a new influx of investor landlords gives some short-lived respite to tenants-in-waiting. Both investor landlords and first-time buyers looking to buy smaller homes are finding them in short supply. As they’re typically owned by potential first-time sellers, the price gap and costs of moving to the second step on the housing ladder deter them from coming to market. Competition is most fierce in this sector, with first-time buyers and buy-to-let investors going head-to-head for the same properties.”

“Councils have plenty of powers to enforce standards in private rented housing and tackle criminal landlords. It is sad that at best the record on enforcement is patchy and at worst non-existent.”

The Housing Bill makes clear that landlord licensing schemes are not needed and serve only as a money raising exercise by councils.

Local authorities now have serious questions to answer. Why are they charging good landlords when they can collect the information they need to drive out criminal landlords using council tax registration forms for free.”

Saturday, October 17, 2015

I've just agreed a sale on one of my properties

Purchasers are like buses. I have waited ages; well 5 months to get one serious buyer and then I receive two serious offers all within a couple of days. The dilemma is should I go for the cash buyer offering two grand under the asking price or hold out for the potential of the mortgage purchaser offering me two grand over the asking price. The difference is £4000 on an asking price of £110000. Four grand is a decent amount in anybodies book so what do I do? Is a bird in the hand better than two in the bush?

Context to my property sale

As with life context is everything. I'm guessing there will be a number of you that would go for the higher offer. I'm tempted. I don't need the money so I could easily wait the extra month or so that I might face waiting for the potential purchaser obtaining the mortgage. After all they have already shown my estate agent the AIP (Approval In Principle). However, I'm not plumping for the higher offer and here's why.

A bird in the hand....

Firstly, I know having recently received a mortgage AIP it means very little. It's not an approval of mortgage funds. This only comes after the mortgage company scrutinising your personal financial circumstances and looking at detail at a landlords investment multiples such as the rental cover and Loan To Value of the proposed purchase. Only after these meet the mortgage companies increasingly stringent criteria will a landlord get the funding they need to make a mortgage happen.

I know the cash purchaser is keen. My estate agent has already verified proof of funds so she can see that he has the money to cover the purchase. He has already sent out an electrician to check out the property. My estate agent informs me that he has already brought a similar property to mine in the area so he is aware of the leasehold structure and type of lease that affects my property. He seems keen to get things going.

On the hand the offer from the landlord looking to secure the purchase with a mortgage is decidedly flaky. Having made several offers to purchase the property she has offered me £110000 & £107500 and now when she found out somebody else had offered she came back with £112000. Neither of the offers so far had been accompanied with a firm commitment or progression. My agent has already expressed concerns over whether this purchaser is likely to moves things forward.

Given, that now I'm having to pay council tax and the ridiculous utility standing charges which works out at about £60 per month for my electricity and gas bill whilst I'm using absolutely nothing...ridiculous! So my property is costing me money together with the mortgage costs on an empty property. I don't like the idea of the property being empty over winter.

I'm happy therefore to take less, get the certainty of a sale and be able to move on and employ my funds in alternative investments. But I might be wrong. Thoughts from the landlord brothers and sisters?

“The colour is starting to return to the cheeks of the Scottish property market, with house prices brightening by £1,850 (1.1%) in the month of August, and starting to shake off the side effects of April’s Land and Buildings Transaction Tax. The change in tax regime caused a three month decline in house prices between April and June, but now standing at £167,426, the average house price in Scotland has climbed out of its short-term slump, and is once again higher than at the end of last year.

On an annual basis, house price growth is showing healthier vitals too. The LBTT has slowed high value property sales considerably, which is still muffling the average house price in Scotland. Since the LBTT came into play, the number of million-pound property sales has fallen to an average 4 per month over the last 5 months, down from 12 in 2014. But it’s not just at the very extremes that this has had a dampening effect – the brakes have been applied to all sales above £254,000.

As a result of the tougher top-end tax rates, the most expensive parts of the country have recorded price falls year-on- year, and this is starting to close the price gap between Scotland’s preeminent cities. On an annual basis, house prices in Glasgow have increased by 6.5% to reach £141,871, compared to a 3.4% decrease of property values in Edinburgh since last year. As the area with the highest house price across Scotland, Edinburgh’s price fall encapsulates the current trend of declining house prices in high value areas qualifying for higher rates of transaction tax.

But the middle and the lower tiers of the market have got a new lease of life under the new tax regime. Scottish property sales totalled 9,151 in August 2015, a 7.5% uplift on a year ago, and representing the highest number of sales for the month of August since 2007. This also marks the fifth month in 2015 to date where sales have overtaken the equivalent month in 2014. This rapid recent growth in Scotland is grounded in the new LBTT rates, which are stimulating demand at the bottom and middle rungs of the property ladder. From May to July 2015, semi-detached homes have seen the largest annual uplift in sales in Scotland, soaring 5%, and this was closely followed by a 4% boost in flat purchases compared to a year earlier. In contrast, sales of more expensive detached properties are down 4% year-on-year.

Overall, the activity emanating from the bottom of the property market means that from June to August 2015, Scotland has experienced the strongest year-on-year increase in property sales of any part of Britain, with sales climbing 6%. Meanwhile, sales volumes were down by 2% across England and Wales and seven regions saw sales fall over the same period.”

Tuesday, October 13, 2015

A Lambeth landlord is set to pay dearly for converting a property into flats without proper planning permission.

Following losing his planning appeal on the rental property in Harpenden Road, West Norwood, landlord Gilbert Garrick pleaded guilty to non-compliance of planning law.

He now faces fines of £30,000, costs of £15,000, and a chokingly large sum of £382,000 - the estimated total rent paid by the tenants living in the unauthorised flats during the period, which is now recoverable under the Proceeds of Crime Act.

Lambeth Council’s cabinet member for Housing, Cllr Matthew Bennett, comments : “Lambeth takes a hard line against rogue landlords who try to make a quick buck out of the housing crisis.

“This landlord will have to pay over £400k in fines and could face prison after ignoring the council’s early warning.

Moving my property portfolio upmarket

I've decided to go up market and for more quality property aiming for capital growth and to add value through development. Just like in business generally, the mid market whilst promising the widest appeal also risks over supply and ubiquity which make rental properties hard to rent and then ultimately to sell. and thereby maximise your capital return.

There is invariably money to be made at the bottom of the rental market where high rental yields for those prepared to accept a low capital growth in return for a cash cow.

However, anybody who has invested in luxury property in London will know that capital growth can be stellar. I can't afford to be in that market and to a degree I think it's ex-growth. Conversely, I don't want to let to tenants on benefits or own a street of income producing houses in Sunderland. For me the way forward is a small portfolio of exclusive, unique and desirable properties in good locations. This means if I ever want to sell I know there will be a line of owner occupiers cuing up to buy them (what ever the state of the economy or local market).

Selling an under performing rental property

I've written before about the fact that sometimes a landlord needs to concede defeat and just sell up and here is some advice about selling a btl property. Selling an under performing property makes sense. Holding on desperately to a property hoping that it's lettability will improve or that it will start attracting good quality tenants can be a false dream. Some properties do just not rent well and will just cause you problems. The answer is just to get rid. This gives you an opportunity to buy a property that is better suited to your rental model or to use your funds for alternative investments. This is exactly what I'm doing with one of my properties and having just agreed a sale I'm 'hopeful' that I will have additional funds in my war chest before Xmas. This brings me on to my purchases.

Buying 2 new investment properties

I've already bought a penthouse repossession which I'm refurbishing and believe that I can add a bit of 'bling' and value by reinstating it's spiral staircase, adding an additional bedroom and giving an overall make over. I'm hoping that by spending £30,000 I can take the value significantly north of £200k having spent £150k on it's initial purchase. I'm guessing that this property once finished will be a perfect bachelor pad for a well healed footballer, professional or business person once the refurbishment work have been done. I expect to make at least 10% on the gross development value (GDV) of the project but hopefully there should be the potential to easily double that if I get it right.

The second property I'm looking to buy is luxury Bakewell accommodation in the picturesque Peak District town. It is in a converted mill and presents an opportunity for both a holiday let or holiday home. This town and the property should have a ready market of buyers amongst the increasing number of well healed retirees in the coming years should I want to sell. So busy few month with half a million in property purchases and a sale going through. I'll keep you posted on how it goes!Landlord insurance - professional rates - immediate cover